Dow Jones Indexes and the Chicago Climate Exchange (CCX) announced the launch of two indexes to serve as benchmarks for exposure to the European Union Emissions Trading Scheme and Kyoto Protocol Clean Development Mechanism (CDM).
The two new indexes are the first in a series of global emissions indexes to be launched jointly by Dow Jones Indexes and CCX, which is North America’s only voluntary, legally binding greenhouse gas emissions trading system.
The Dow Jones/CCX European Carbon Index is composed of actively
traded European Union Allowances (EUA) futures contracts on the
European Climate Exchange. It measures the present discounted value of
EUAs–the carbon credits issued in the European Union Emissions Trading
Scheme, across different maturities.
The Dow Jones/CCX CER
Index measures the present discounted value of CERs–the carbon offset
allowances issued by the United Nations under the Kyoto Protocol Clean
Development Mechanism, across different maturities.
Emissions trading aims to reduce pollution using a market-based approach of providing economic incentives to companies that reduce their emissions beyond their target. In this system, also referred to as cap and trade, a government or other regulatory authority sets a cap on the amount of pollutants that can be emitted and distributes allowances, or credits, that represent the right to emit a specific amount. Companies that do not meet the cap buy credits from companies that emit below their specified amounts. The group as a whole meet the set environmental goal at least cost to society.
"The Dow Jones/CCX EUA and CER Indexes provide market participants with price gauges to assess their exposure to this growing asset class. We hope to expand our offerings for emissions-themed benchmarks in the future," said Michael A. Petronella, president, Dow Jones Indexes.
Unlike equities that give shareholders an ownership stake in a corporation, carbon futures contracts normally specify a certain delivery date of the underlying physical carbon spot. To avoid the delivery process and maintain a long futures position, nearby contracts must be sold and contracts that have not yet reached the delivery period must be purchased. This process is known as "rolling" a futures position. The Dow Jones/CCX European Carbon and CER indexes are "rolling indexes" that roll once a year in December over a four-day period.
The Dow Jones/CCX European Carbon and CER indexes are calculated in euro and values are published end of day. Estimated daily back-tested history for the Dow Jones/CCX European Carbon Index is available back to January 2, 2008; for the Dow Jones/CCX CER Index, data is available back to April 1, 2008.
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